RisingShiningSuperpower
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Under Modi-ji, India will soon surpass China and become a superpower by 2020!
http://www.ft.com/cms/s/0/16490bd2-31c4-11e4-b377-00144feabdc0.html#axzz3C7wgYVIE
India eyes China as economic confidence returns
©AFP
On the up: construction continues in Mumbai while data showed India expanded 5.7 per cent in the first quarter
When the talk turns to China, you can tell India is feeling improved. During Delhi’s late 2000s boom, bullish types often said that Asia’s third-largest economy would overtake its larger neighbour’s double-digit growth rates. It never did. Instead, years of political drift and a spate of graft scandals left Indian optimists chastened.
Those comparisons with China are now making a minor comeback, reflecting new-found energy under Prime Minister Narendra Modi, who marks 100 days in office on Tuesday. But they are also potentially worrying signs of overconfidence, in a recovery that remains both gradual and fragile.
The immediate cause for the latest wave of euphoria arrived last Friday, with data showing India expanding at an unexpectedly buoyant 5.7 per cent in the first quarter, its best figures since early 2012. Industrial growth jumped too, after two flat years.
Arun Jaitley, finance minister, this weekend predicted further improvements over the next few quarters. Investors agree, pushing shares to record levels on Monday. With China’s economy turning down towards 7 per cent growth, the idea that India might expand more rapidly no longer seems quite so absurd.
Prashant Jain, the head of HDFC Mutual Fund, India’s largest asset manager, says his country will do just that in a few years, becoming the world’s fastest growing large developing economy. Chetan Ahya, chief economist for Morgan Stanley in Asia, agrees. “Perhaps in three years, as China keeps slowing, yes, India will be growing faster,” he says. “And it could be faster still if the government is bold.”
The irony is that Mr Modi had little, if anything, to do with this bounce. He was not in power for most of the period covered by Friday’s figures and his administration has made slow progress in reducing the bureaucratic hurdles that hobble investment.
Raghuram Rajan, governor of the Reserve Bank of India who took office a year ago, deserves more credit, having helped to restore business confidence with his push to curb inflation. Belated action by the last government to cut spending helped too, as did an easing of the global pressures that hit India last year, along with other emerging markets.
Yet Mr Modi is responsible for the return of India’s confidence in a broader sense. His overwhelming election victory in May, his gruff sense of purpose, his pro-business reputation; all have lifted spirits. After so many rudderless years, the prime minister looks like a leader too, as when he headed to Japan this weekend with a bevy of tycoons in tow, seeking investment deals.
For all that, there are good reasons to be wary of the spring in India’s step. Economists warn that Mr Modi will have to bring in further spending cuts to meet a tighter fiscal deficit target. As a result, the economy may well fall back again over the coming quarters.
Even if it does not, analysts believe there is scant chance of a return to 8 or 9 per cent growth, without reforms of the sort that Mr Modi has thus far avoided, such as reducing labour market restrictions. Internationally too, the picture is far from benign. Mr Rajan says India is better prepared for the end of US ultra-easy monetary policy. But he has still been warning darkly of a possible global crisis when liquidity runs out, while stockpiling dollar reserves – hardly signs of blithe assurance.
Partly for this reason, even the China comparisons are more modest this time, predicting only a gradual convergence of growth rates. Previously the argument went that India’s economic model would prove superior, boosted by youthful demographics, democratic institutions and proficiency in English. So wrong did these predictions prove, that few are likely to make them again in a hurry.
Instead, the risk is that India’s mini-rebound will lessen pressure on its government to take unpopular decisions. Sceptics say India introduces economic reforms only in the face of calamity, as after its 1991 balance of payments crisis. As he seeks to emulate China, Mr Modi has the ideal opportunity to prove them wrong.
http://www.ft.com/cms/s/0/16490bd2-31c4-11e4-b377-00144feabdc0.html#axzz3C7wgYVIE
India eyes China as economic confidence returns
On the up: construction continues in Mumbai while data showed India expanded 5.7 per cent in the first quarter
When the talk turns to China, you can tell India is feeling improved. During Delhi’s late 2000s boom, bullish types often said that Asia’s third-largest economy would overtake its larger neighbour’s double-digit growth rates. It never did. Instead, years of political drift and a spate of graft scandals left Indian optimists chastened.
Those comparisons with China are now making a minor comeback, reflecting new-found energy under Prime Minister Narendra Modi, who marks 100 days in office on Tuesday. But they are also potentially worrying signs of overconfidence, in a recovery that remains both gradual and fragile.
The immediate cause for the latest wave of euphoria arrived last Friday, with data showing India expanding at an unexpectedly buoyant 5.7 per cent in the first quarter, its best figures since early 2012. Industrial growth jumped too, after two flat years.
Arun Jaitley, finance minister, this weekend predicted further improvements over the next few quarters. Investors agree, pushing shares to record levels on Monday. With China’s economy turning down towards 7 per cent growth, the idea that India might expand more rapidly no longer seems quite so absurd.
Prashant Jain, the head of HDFC Mutual Fund, India’s largest asset manager, says his country will do just that in a few years, becoming the world’s fastest growing large developing economy. Chetan Ahya, chief economist for Morgan Stanley in Asia, agrees. “Perhaps in three years, as China keeps slowing, yes, India will be growing faster,” he says. “And it could be faster still if the government is bold.”
The irony is that Mr Modi had little, if anything, to do with this bounce. He was not in power for most of the period covered by Friday’s figures and his administration has made slow progress in reducing the bureaucratic hurdles that hobble investment.
Raghuram Rajan, governor of the Reserve Bank of India who took office a year ago, deserves more credit, having helped to restore business confidence with his push to curb inflation. Belated action by the last government to cut spending helped too, as did an easing of the global pressures that hit India last year, along with other emerging markets.
Yet Mr Modi is responsible for the return of India’s confidence in a broader sense. His overwhelming election victory in May, his gruff sense of purpose, his pro-business reputation; all have lifted spirits. After so many rudderless years, the prime minister looks like a leader too, as when he headed to Japan this weekend with a bevy of tycoons in tow, seeking investment deals.
For all that, there are good reasons to be wary of the spring in India’s step. Economists warn that Mr Modi will have to bring in further spending cuts to meet a tighter fiscal deficit target. As a result, the economy may well fall back again over the coming quarters.
Even if it does not, analysts believe there is scant chance of a return to 8 or 9 per cent growth, without reforms of the sort that Mr Modi has thus far avoided, such as reducing labour market restrictions. Internationally too, the picture is far from benign. Mr Rajan says India is better prepared for the end of US ultra-easy monetary policy. But he has still been warning darkly of a possible global crisis when liquidity runs out, while stockpiling dollar reserves – hardly signs of blithe assurance.
Partly for this reason, even the China comparisons are more modest this time, predicting only a gradual convergence of growth rates. Previously the argument went that India’s economic model would prove superior, boosted by youthful demographics, democratic institutions and proficiency in English. So wrong did these predictions prove, that few are likely to make them again in a hurry.
Instead, the risk is that India’s mini-rebound will lessen pressure on its government to take unpopular decisions. Sceptics say India introduces economic reforms only in the face of calamity, as after its 1991 balance of payments crisis. As he seeks to emulate China, Mr Modi has the ideal opportunity to prove them wrong.
